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Needles in Haystacks?

Every year, no matter the mood of the mortgage market, approximately 4% of credit union members buy a home. Finding them has been likened to looking for needles in haystacks, a well-worn comparison we've all heard far too often. Who are these 4% and how you find them, are two questions that one credit union is successfully tackling.

Every year, no matter the mood of the mortgage market, approximately 4% of credit union members buy a home. Finding them has been likened to looking for needles in haystacks, a well-worn comparison we've all heard far too often. Who are these 4% and how you find them, are two questions that one credit union is successfully tackling.

Let's review. Everyone with any connection to home-financing knows that we became a nation of serial refinancers from 2001 through 2003. That's not news, however, this is: about 40% of all loans written in those three years went for the purchase of a home. This year that number is projected to rise to almost 55%. When the refinance bubble ended in late summer 2003, many lenders, including credit unions, saw their loan volume evaporate. There were credit unions, though, that continued to make loans. Who were they? They were, and continue to be, those that were concentrating on helping members purchase homes.

"We had our purchase-money marketing strategy in place long before refinancing came to an abrupt halt," said Lloyd Gill, Chief Operating Officer of $203 million City County Credit Union of Ft. Lauderdale, Florida. The credit union began planning in early 2003 for what they knew was inevitable. "Refinancing comes and goes, yet members will always purchase homes. There is no better way we know of to build long-term relationships than to finance a home for first-time buyers, or help members with the purchase of their next home," he continued. "The marketing question that is as old as 'needles in haystacks' is how to find these members before they secure a mortgage from another lender," he added.

City County Credit Union knew mass-marketing was not the answer. Targeted-marketing, on the other hand, had proven effective for other credit union products, and it seemed a natural building block for a purchase-money strategy. So proactively, beginning last October, the credit union analyzed its membership, choosing all with scores from the A+ through B credit tiers.

Members received an internally created marketing piece that stressed the ease of applying with City County. Another part of the credit union's strategy included educating members about different loan products they might consider. The first mailing re-introduced the 5/1 ARM product. Additionally, for those members interested in applying on-line, the credit union offered to waive its usual application fee of $325. "We've been a Prime Alliance customer going on three years," commented Gill, "Not only is the site easy to use, we can provide members with a promotional code which effectively pays their application fee," he continued.

Here is proof that targeted marketing works. October's promotion resulted in $2.3 million in closed mortgage loans, perfectly acceptable for a first attempt; whereas, February's campaign produced dramatically more impressive results. First, there's the number of loans: 65 total applications, for approximately $8 million. Ninety-percent of these members received approval at the time they applied, so the likelihood that these will become closed loans is high. It gets even better. Two-thirds of the applications are for purchase-money loans, which is better than the overall market's purchase performance, and even though we are experiencing record low rates yet again, two-thirds of these members sought an adjustable rate mortgage.

City County Credit Union has drawn four conclusions thus far from their newly implemented strategy. First, reaching out to and creating awareness among creditworthy members results in mortgage applications that turn into closed loans. Second, members with excellent credit have no problem applying on-line as they enjoy the speed and convenience the credit union's web site affords them. Third, members respond to appealing promotions such as the 5/1 ARM program combined with 2% closing cost subsidy and waived application fees. Lastly, it is possible to sell ARMs in a low rate environment indicative of City County Credit Union's demonstrated successes.

The origin of the needle/haystack analogy is elusive. Members who are in the market to purchase homes really aren't. "Mortgage lending is our growth and service strategy for City County Credit Union. We know that we provide the best overall value in terms of products, pricing and service for our members. Our purchase-money strategy is helping convince members we can be their lender of choice," concluded Gill.

For more information about Prime Alliance or how it's solutions can improve the quality of life for your credit union's members, visit www.primealliancesolutions.com.

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